THE DEMOCRATIZATION OF DIVERSIFICATION: HOW EXCHANGE-TRADED FUNDS (ETFs) ARE TRANSFORMING INVESTMENT STRATEGIES (original) (raw)

his article explores the transformative impact of Exchange-Traded Funds (ETFs) on modern investment strategies, emphasizing their role in democratizing diversification. ETFs are presented as versatile financial instruments that enable both professional and individual investors to access diversified portfolios at relatively low costs. The paper discusses the mechanics of ETF creation, trading, and redemption, along with their advantages, including transparency, liquidity, and cost efficiency. It also addresses potential drawbacks, such as liquidity challenges, tracking errors, and systemic market risks. The evolving role of ETFs in financial markets is contextualized with technological advancements like artificial intelligence and machine learning, which enhance portfolio management capabilities. Additionally, the article examines the implications of passive investing on market efficiency, stock liquidity, and active management, offering a balanced perspective on the future of ETFs in portfolio management.